Correlation Between Aqua America and American States
Can any of the company-specific risk be diversified away by investing in both Aqua America and American States at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aqua America and American States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqua America and American States Water, you can compare the effects of market volatilities on Aqua America and American States and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aqua America with a short position of American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua America and American States.
Diversification Opportunities for Aqua America and American States
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aqua and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water and Aqua America is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aqua America are associated (or correlated) with American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of Aqua America i.e., Aqua America and American States go up and down completely randomly.
Pair Corralation between Aqua America and American States
Assuming the 90 days horizon Aqua America is expected to generate 1.31 times more return on investment than American States. However, Aqua America is 1.31 times more volatile than American States Water. It trades about 0.14 of its potential returns per unit of risk. American States Water is currently generating about 0.17 per unit of risk. If you would invest 3,581 in Aqua America on August 29, 2024 and sell it today you would earn a total of 203.00 from holding Aqua America or generate 5.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqua America vs. American States Water
Performance |
| Timeline |
| Aqua America |
| American States Water |
Aqua America and American States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqua America and American States
The main advantage of trading using opposite Aqua America and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqua America position performs unexpectedly, American States can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American States will offset losses from the drop in American States' long position.| Aqua America vs. United Utilities Group | Aqua America vs. Guangdong Investment Limited | Aqua America vs. TTW Public | Aqua America vs. Superior Plus Corp |
| American States vs. TITAN MACHINERY | American States vs. DAIRY FARM INTL | American States vs. Chongqing Machinery Electric | American States vs. Titan Machinery |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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